First home buyers have a lot to think about when entering the property market and there are quite a few traps they can easily fall into. At Brisbane Buyers Agency we understand the stress, time and energy that can go into buying any home – let alone a first home. To help make the process easier for first home buyers here are some common mistakes we find home buyers can make.
Traps Are Everywhere
At Brisbane Buyers agency we know buying a first home can be like entering a minefield. Here are 5 of the common mistakes w find most homebuyers can make.
First Home Buyer Traps #1 – Tunnel Vision Brief
Every first home buyer starts with an idea of what they want to buy and where – and we definitely believe in having a clear brief – but not at the cost of missing out on opportunities that could be in other suburbs they haven’t consider.
I sometimes find first home buyers can have ‘tunnel vision’ and so miss out on a great deal.
A friend of mine, when buying her first home many years ago was so focused on getting the perfect Queensland worker’s cottage that she passed up an amazing home, that needed very little work, on the edge of a quiet reserve at the top of a hill. Instead, she bought a ‘renovator’s’ delight that cost way more to renovate and would never have the resale value of the home adjoining the reserve.
Today my friend recognises she was too focused on just one thing in her brief and because of this missed out on an amazing opportunity in the same suburb and in neighbouring suburbs.
Sometimes first home buyers are forced to look at other areas because they simply cannot afford the area they want, but in many cases, there are different types of homes that are affordable in the area they would prefer to live in.
First Home Buyer Trap #2 – Not Understanding Capital Gain
Two of my recent first home buyer clients wanted to buy a unit. They had $480,000 to spend and we’re looking at a 3 bed room/2 bath around the Moorooka area.
I took them through our Budget Health Check process, which looks at a range of things including capital gains over the past five years. While I don’t often recommend buying units I understand they fill a budget/lifestyle need and help people to get into the market.
As part of our Budget Health Check, my clients got very clear about the amount of capital gain on a 3 bedroom, 2 bathroom unit compared to a 2 bedroom unit. In that area, the capital gain was the same at best or negative. So why invest more money in a non-performing asset?
Understanding this vital piece of information saved them $50,000 when they decided to buy a 2 bedroom unit close to CBD, walking distance to train station and cafes for $430,000.
As they didn’t spend all their budget they are now well on their way to saving for a home and eventually convert this unit into an investment property
Both buyers are excited they are in the property market and have peace of mind of knowing they’ve made an extremely smart buy that is already allowing them to plan for their next purchase.
First Home Buyer Trap #3 – Relying on the First Home Owners Grant
This is a big trap. The true cost of buying a new home is not the price you pay for your home. It is the limited capital growth that you potentially are exposed too over your ownership. You really need to understand how much are you really saving by buying a new home or unit versus an existing home.
When I compare new detached dwellings or units with the equivalent existing home I typically find it is not only cheaper to buy the established home – capital growth is much better.
To understand the danger of buying a new unit, especially ones sold off the plan, read my blog here.
If you are thinking of applying for the first home buyers grant you can find out more here.
First Home Buyer Trap #4 – Analysis Paralysis
“Have I missed something?” That’s a good question to ask but be careful of over-analyzing your options.
Do you stockpile data then continue to search for more? Are you overly cautious and find it hard to make a decision?
I once knew someone that had a subscription to RP data, Price finder, another paid database, and access to all the free information out there. When we last spoke he had been looking for two years and, to the best of my knowledge, has still not purchased. Whist slightly off-topic, relying on auto-generated appraisals to determine the value and your asking price is a big mistake.
While this is an extreme example it is dangerous as the property market increases in value over time. This means what you may have been able to afford 12 months ago may now be out of your reach.
While looking at trends, metrics, and buyer confidence indexes have their place of course – you actually need to take action if you want to make your money work for you in the property market. Delaying, especially over 12 months, will impact you.
To find out more about the right time to buy into the property market read my blog here.
First Home Buyers Trap #5 – Rushing Your Buy
The opposite of analysis paralysis is being in a rush to buy. I’ve seen some home buyers rush in and make big mistakes.
A number of years ago I worked with a young couple under my Smart Home Buyers Kick Start coaching program. They had $450,000 to spend. He was very handy and had a trade background so it made perfect sense for them to buy a renovator. But after inspecting eight homes they got tired of the search and decided to buy a new house and land package, which was quicker and easier for them at the time.
Now 6 years on they want to borrow some additional money – but their home has not appreciated in value at all because they bought in a location that has plenty of new stock available and up and coming into the market. Capital gain in this area is very limited. If they had been willing to invest more time in their search, and not have shiny and new straight away, they would be well ahead financially and have options.
If you feel like you might be a rusher, remember Rome was not built in a day. You need to take your time, look in the right places, and make sure you understand exactly what you are buying and how it will set you up for your future.
If you don’t have time to do the research get a professional to help you. As a buyers agent, this is what I do every day for clients who do not have the time or feel frustrated by the level of research needed to find a home that is a smart buy and a good fit financially and lifestyle-wise.
If you are a first home buyer on a budget I also offer my Smart Home Buyers Kick Start coaching program which is about 25% of my full buyer’s agent service. For more information on Smart Home Buyers Kick Start click here. In the program, you get access to face-to-face time with me as well as videos that take you step-by-step through the process. To find out more about it click here.
First Home Buyers Traps … To Be Continued
This article covers 5 of the 9 common traps first home buyers can make when buying a property. To find out the other 4 traps click here.
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